Daily Commentary
 | 08/10/2019

Chances for a deal between the US and China are lower

As per media, chances for a deal seem to have lowered as the US government blacklisted Chinese companies for the treatment of Muslim ethnic minorities by the Chinese government. The move is expected to complicate the situation even more in the upcoming negotiations later this week. Also, the Hong Kong protest seems to have affected the US stance, as media report that President Trump warned that the situation had the potential to hurt trade talks. Never the less and always according to media, US President Trump and economic advisor Kudlow President Trump sounded upbeat about the upcoming discussions with China. As for the chances of a deal this week, US President Trump seemed to doubt it and stated that it is probably unlikely. We expect the issue to continue to affect the USD’s direction as well as the Aussie. USD/JPY rose yesterday breaking the 107.20 (S1) resistance line, now turned to support. Despite the rise, we expect the pair to stabilise somewhat before opening its next leg. Also, the green candlesticks in the 4 hour chart, seem to get smaller and smaller, which could imply that the pair’s rise could be losing steam. Should the pair find fresh buying orders along its path, we could see it breaking the 107.75 (R1) resistance line and aim for the 108.35 (R2) resistance level. On the flip side, should the pair come under the selling interest of the market, we could see the pair breaking 107.20 (S1) and aiming for the 106.60 (S2) support level.

The pound continues its slide

The pound continued to slide lower against he USD as Brexit doubts continue to dominate the markets. Investors seem to be increasingly concerned that Britain and the EU were no closer to a agreeing a deal about Brexit. Analysts expect the this and the next week to be a “roller coaster” for the pound as developments in the negotiations and the inner UK political stage are expected to be intense. UK’s PM Johnson, according to media seems to be preparing for Brexit talks to collapse and also prepares to blame Ireland, Parliament and EU. Should there be further negative headlines about Brexit we could see the pound weakening further. Cable continued its slide, clearly breaking the 1.2310 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair and for bearish bias to change we would require the pair to clearly break above the downward trendline, incepted since the 3rd of October. On the flip side and on a more technical level we note that the pair seems to be finding considerable support at 1.2274 over the past days and the price action of the pair seems to form a descending triangle, which enhances our bearish bias. Should the bears maintain control over the pair’s direction, we could see cable breaking the 1.2205 (S1) support line and aim for the 1.2110 (S2) support line. Should the bulls dictate the pair’s direction, we could see it breaking the 1.2310 (R1) resistance line and aim for the 1.2400 (R2) resistance hurdle.

Other economic highlights today and early tomorrow

During the European session today, we get Germany’s industrial output growth rate for August, In the American session, we get Canada’s number of House starts on an annualized basis for September and the US PPI growth rate also for September. Oil traders should note that just before the Asian session, we get from the US the API weekly crude oil inventories figure. As for speakers, ECB’s Lane, Chicago Fed President Evans, Fed Chairman Jerome Powell, BoE Governor Mark Carney and Minneapolis Fed President Kashkari are scheduled to speak today.

GBP/USD H4

• Support: 1.2205 (S1), 1.2110 (S2), 1.2020 (S3)
•Resistance: 1.2310 (R1), 1.2400 (R2), 1.2610 (R3)

USD/JPY H4

• Support: 107.20 (S1), 106.60 (S2), 106.00 (S3)
•Resistance: 107.75 (R1), 108.35 (R2), 109.00 (R3)